You’re looking at it wrong

This great data visualisation from the NY Times comes to us via a really fascinating website called Information is Beautiful. It represents the sales in billions of today’s dollars of the various music formats over time.

They claim it represents the dwindling death knell of the music industry. That’s not quite right (even leaving aside the nonsense assertion that the record business = the music industry). While put together in aggregate, the overall graph would show a larger, fatter, longer increase and decline, what this graph does not show is equally interesting.

The trailing tail to the right of the graph seems to indicate the death of music business. But look to the left. This graph does not start at the beginning of the music business. And nor does it start only a short while after the beginning of the music business.

It starts in 1973.

I don’t know about you, but I was around in 1973. I wasn’t very old, but I was old enough to be aware of music. It had been around long before I had. And even though the graph would have been tiny – at least in comparison to the uncharacteristically massive spike in CD sales around 1999 – there was no crisis in the music business then.

My guess, in fact, was that there was opportunity. In 1973, the small numbers meant that people who sought to do new and interesting things were able to do those new and interesting things. Less was at stake (at least, in aggregate) and so people took risks.

New and innovative kinds of music flourished in the margins. Funk, disco, punk, psychedelic, metal, and reggae all started to emerge as significant forces from that decade. Lots of tiny labels did amazing and sometimes incredibly profitable things. Risk-takers were sometimes massively rewarded. Those who kicked at the edges often flourished.

Skip forward to 1999 – ten years ago now – and you witness the height of corporatism in the recorded music business. A world of a few stars selling millions of copies of safe and frequently dull music. But most importantly, the business people who were teens in 1973 were able to take the music they loved from their youth and turn it into a multi-billion dollar industry.

And while the interesting new genres have been created in the margins all through that history, it’s the forms (and their often watered-down derivatives) loved by those execs that have massively prospered through the recorded music boom era.

Of course, music didn’t start in 1973. Or 1923 for that matter – and nor did the ability to make money from it. The last 35 years provides us with an interesting historical anomaly as far as that graph is concerned.

The boom and bust pattern of each recorded music format adds up to an overall rise and decline of corporatism in the recorded music industries. Culturally, this could well be something to celebrate.

Personally, I’m hopeful for new and interesting musical forms and genres coming from the margins and being able to reach a significant audience.

It’s cheaper to experiment now. It’s easier to reach an audience than ever before, and the economics are such that you don’t need for corporations to be making billions in profit in order to make a decent living at it.

I’m not saying that this is the best time in history for music. I’m actually hopeful that we haven’t yet seen the best time for music. It’s even possible that the biggest selling record of all time hasn’t been made yet.

My point is that the graph above only represents a crisis for a particular way of organising music business, and not for music business itself – and certainly not for music.

In fact, if we’re clever about it, this might be one of those golden ages for musical culture that seem to coincide with the skinny bits of that graph.

21 Comments

Another interesting thing is that previously one format has dominated the sales at any given time. The end of the graph is the first time that there have been at least four equally plausible areas for sales. Add together the contributions of Download/Mobile and Other and you get something nearly as big as CD – and these revenue streams are only a few years old.

This matches a general trend in all industries – fragmentation. Just because money is being made from music in a variety of ways, doesn’t mean it will stop being a viable way to make money.

Of course it does mean that the industry is going to look very different, which is a given for most people reading this, but an unwelcome fact for the top end of the music industry.

Who’s got himself a nice clean minimalist new site design then? Very tasteful.

As for the data visualisation (remember when they were just called graphs?) I saw this a couple of weeks ago and in a surprising burst of optimism the first things I noticed were:

1) Three of the formats represented on the graph (album d/l, single d/l, other) are increasing, and
2) By historical comparison with the other formats on the chart, it’s very early days for all of them.

And this: “In fact, if we’re clever about it, this might be one of those golden ages for musical culture that seem to coincide with the skinny bits of that graph.”

Great post! I agree that there is much more to celebrate than morn about the revolution that is happening in the music business nowadays. I am thrilled at the prospect of a more level playing field, and the idea that now it comes down to connecting with individuals instead of hoping for the chance to sell one’s soul to a corporation.

However, I also have to point out that the graph is simply displaying data, and it does so quite well. I guess it depends on how you think of the terminology. I’ve never considered myself part of an industry although technically, I guess I am. But when I look at the graph I don’t get the feeling that it’s trying to imply that my career is over.

Don’t mean to split hairs. Like I said, it’s a great post and a great blog. Keep it up.

It’s a nice vision, Andrew, but I fear you’re the one who may be looking at it wrong.

Interesting things do in fact come from the margins, but the key of these is the profit margin.

Let’s not misunderstand the situation then and now. One of the reasons it was possible to experiment in the 70s was that there was a boom in demand for music (tied to cultural changes and another, much more widely publicised, Boom), coupled with the technical capability to produce recordings (fairly) cheaply.

People wanted to buy (note emphasis) music, the supplier market was still fragmented and the music media sector had not yet become homogenised. Short run production for niche markets could make sense if there was enough demand.

By the nineties a lot had changed, in that much of the independent sector had either lost its independence (by becoming integrated in the major label groups) or gone out of business. It is an inherent quality of any thriving market that the smaller players get forced out by the most successful ones. Adding to it the fact that music’s natural partner – the media sector – had also become something of an oligopoly around this time, it does not come as much of a surprise that the entire business had become set in its ways and something of a closed shop.

Now we have many of the ingredients that could enable the resurgence of a more diversified market, save the most important one: the profit margins. No matter how much you shave the costs, you cannot get past the fact that you need a non-zero price to make any money.

Please, don’t tell me about new models. I’ve analysed just about everything being proposed at the moment and it all pretty much boils down to scale. Even iTunes, which is by far the most artist-friendly option, is burdened with minimal earnings, that require sales at the level of pretty successful independent releases of old just to break even. Subscription services are a joke, earnings-wise, and if an all-you-can-eat download proposition comes along, only the major labels will benefit (do the sums).

Unless an artist’s fans can be persuaded to purchase premium (high-margin) physical releases, even a decent fan-base may not prove enough to sustain and develop the artist. Yes, we can consider recordings as a pure promotional tool (rendering all of the above a non-issue), but that alters the economics of recordings completely. For a start, it makes sense to cut back on their number, simply because they’ll become the equivalent of a promotional cost. If a case cannot be made that more recordings will boost sales of the artist’s other items (which is at least a possible scenario), recording new material will no longer make any economic sense. Given that most artists are strapped for cash as it is, the last thing they need are more costs.

To sum up, the options are there, but unless people actually pay for music (not music in general, by the way, but for specific artists’ products) it won’t matter. The only way to break the major labels’ stranglehold on the business is for the audience to start making consumer decisions about the music they want to hear. In other words: buy.

Interesting graphic representation, thanks for sharing. Great to hear your view on things too – I totally agree that it’s not the industry declining right now, it’s the end of an unrealistic spike in physical sales. Much of this past revenue was going to the major labels’ fat cats, and their decisions on artistic direction would be to make them further money, not to help the industry or music scene blossom. That is also one reason for the inevitable decline; people grow tired of their bland, commercial, overrated, over-hyped decisions. People needed new inspiration, yearn to discover new sounds, and the answer was the internet! Where we are going from here is maybe uncertain, possibly fragmented, and definitely exciting :)

Interesting statistics and a great post, as usual, from Andrew. What seems to be missing from these numbers is the cost of production and distribution of all of this music in each of the varied sales models. The RIAA gives figures for music sales, but no accounting of production costs.

In the old “fat” days, a big record company could afford to float a $200,000 advance for a moderately successful band to make their new CD. The same band probably could have made the same CD for more along the lines of $20,000, or even $2000 if they were really clever and industrious. The cost of making a decent recording has come down so far, that the responsibility for making a decent product now rests almost entirely with the people who actually create the music. The big corporate structure that used to exist above all of the singers, songwriters, bands and musicians is not nearly so important anymore to the social and cultural aspects of music.

With the level playing field, it will be interesting to look back on the current musical landscape in the next ten or twenty years and see which bands, musicians and recordings float to the top, and stay there.

Andrew, fabulously well assembled post, sir! Great to have all these thoughts pulled together around some statistics that are supposed to be sounding the death knell thanks to those greedy pirates and their illegal downloading.

John G’s point about the cost of recording is utterly key here, and to that you can also add the cost of distributing, promoting, marketing etc. etc… I know a LOT of artists whose first video cost more than their entire album to make, and then got shown on MTV in the middle of the night once, to no-one. Was anyone accountable for that?

This graph could just as easily represent wastage as much as turnover from sales.

I have been maintaining for a couple of years that the music business was returning to a pre-LP state, with a focus on performance as opposed to product. I believe that it is only positive that musicians are forced to re-establish two way relationships with their listeners. While I still don’t believe that the web is the be-all and end-all for artists, it is one more tool for performance and communication.

I’m certainly not weeping over the death of those corporations. All they ever did was water down creativity by rewarding complacency. For sure, those who attempt to cling to outdated business models will die hard, painful deaths. And that is not only true of the music industry.

Speaking of which, I never conceived of music as an “industry”… music cannot be mass produced, as far as I am concerned. Music is something which can only be born of the most intimate human experience. And most of the pop “music” produced by such corporations is no more music than the junk “food” produced by similar-minded corporations is food.

HMP publishing
on August 18, 2009 at 4:27 pm

Sorry to disagree, but the data in the graphs look pretty realistic to me. The peaks seem exaggerated, and compacted, but this is due to the way the data was graphed…probably not the best. First, the authors were only looking from 1973-2008. Yes, we all know the music business started long before that, but who cares here. The authors are looking at the years where there were dramatic shifts in ‘mediums’ for selling music. The far left (1973) shows large sales for LP/EP and 8-track, as was correct then. The far right (2008) shows continued strong CD sales, still stronger than downloads, again as expected. Remember, in 1999 most people were still replacing their LP’s with CD’s, but past 1999 this transition was pretty much complete…so it more represents sales of new music, not replacement of already owned music and new music sales…so you expect a decline post-peak. Also, the download of album/single is on an increase. So, what do we see now 2008 and post….CDs as the predominant form of music distribution, still very strong in volume, and downloading as a new form of distribution, on the rise….sounds right on to me. So what is the problem? None really, except, maybe the download figures do not completely represent all sales. Most musicians these days do not seem to be part of recording rights organizations, such as BMI, ASCAP, SoundExchange etc, much less proper copyrighting of their music,so the RIAA may not have the full scope of sales. The major labels used to take care of the business end really well for artists, and squeezed every dime for themselves. As individual artists pushing our own music, we do not always do the business end as well. After all we are musicians and want to play music, not do business stuff. Maybe the point is that the ‘true’ sales of downloads, although increasing, are under-represented to a degree, because the ‘old’ way of measuring sales does not work in this new world of independent artists and the web….hmmm…

@HMP publishing: Yes, of course. My point being that the recording industry, as opposed to the music industry as a whole, will continue to do well out of back catalogue, whatever. Frankly, I’m mystified as to why anyone should choose to buy old MJ material that is freely available across a multitude of platforms but there it is!

HMP publishing
on August 20, 2009 at 4:56 pm

Hi, Mario….totally agree with you !!! Well, I did go out and buy ‘Thriller’ recently, just to re-visit the arrangements and sounds of the time…Quincy Jones….sometimes history is the greatest teacher of the future….and being a musician myself I still believe in copyrights and paying fairly, because when people get my stuff for free, it hurts…..as you know….it’s our livelihood…

@HMP publishing: Quite right too! I’m not a musician (I’m a film maker) but I suspect that a performing artist would, er, live to perform, live, in front of an audience etc. and I’m encouraged to see that the live performance aspect of the industry is booming now. Another point that’s covered elsewhere here is that the over-hyped demise of the recording industry and the ease of access to production, online distribution and marketing effectively puts power back into the hands of the musicians themselves. Which is exactly as it should be!

Nice graphic, but even more interesting discussion. I totally agree that the amount of money made in the music industry by selling albums / singles etc should not be the only metric on which we base the health of the industry. Nonetheless the height of the peaks compared to the subsequent drop – particularly for CDs – did surprise me a little. I also agree that the sheer number of ways music can ‘get out there’ today will hopefully make for an interesting future for the music industry – it’s certainly not dead.